Manufacturing Accounts Notes Pdf

[Krysta Cirilo]

The manufacturing industry must accept its heavy responsibility for emissions of greenhouse gases. In the US, manufacturing accounts for almost a quarter (23%) of direct carbon emissions, according to the Environmental Protection Agency. In Europe the situation is equally dire: the industry emits an annual total of 880 million tonnes of carbon dioxide equivalents making it one of the largest emitters of greenhouse gases on the continent.

As a major vehicle manufacturer, the biggest challenge for us is still connected to emissions during the use of our products. This accounts for the highest proportion of our complete CO2 footprint, which is why we focus on electromobility and other fossil-free solutions to mitigate the impact. Yet, while it may be a smaller percentage, we simply cannot forget the remaining emissions resulting from the manufacturing and transport of those same products.

It's working. BatteryLoop, an initiative delivered by Stena Recycling, has devised a smart energy storage system that promotes circular energy use with its batteries. For example, batteries used to power a bus can also be used to provide power to a residential complex. Another demonstration of the circular economy in action is the defined goals within the Paris Agreement. Putting this philosophy at the heart of global climate change targets is a clear indication to the wider industry and society in general of how important the circular economy will be to collectively reduce our carbon impact.

The recycling of materials is important to increase resource efficiency. The Environmental Protection Agency estimates that secondary steel production uses about 74% less energy than the production of steel from iron ore (sometimes referred to as virgin steel). Obviously, we need to use as much secondary steel as possible but, in order to continue supporting economic growth around the world, we will still require a lot of virgin steel in the future, as long as it is produced sustainably. In fact, it will soon be possible to create 100% fossil-free steel using fossil-free electricity and green hydrogen, resulting in a much lower climate impact. The need for steel will grow significantly in the long term and newly made fossil-free steel will be needed to meet this demand.

Wider adoption of new technologies, processes driven by artificial intelligence (AI) and techniques such as additive manufacturing (using 3D printing technology to produce tools and parts to enable quicker production and continuous quality improvements) can also go a long way to reducing the environmental impact of our manufacturing, processes and services.

The world is changing and the potential is there for all manufacturers to use this digital transformation to do things better. We can no longer only look inward but must look beyond our own operations towards all other parties along the supply chain.

Manufacturing operations only tell a part of the story. We know that the business of manufacturing is a partnership, so emission responsibility calls for investment in our future from everyone along the supply, distribution and logistics chain.

Insisting on responsible behaviour and responsible purchasing decisions across every area of production and placing high demands on all players is the only way to ensure continued environmental improvement. The onus is on everybody, including major global manufacturers, local suppliers, governments and policy-makers, to make sure components, parts, services and systems are delivered in a way that supports a more environmental way of working. Only by working together can we hope to deliver more sustainable manufacturing.

This pack starts with 5 tasks looking at the manufacturing accounts only, from ledger extracts and notes to the accounts. It moves onto 9 tasks where both the manufacturing account and income statement needs to be completed, including using notes to the accounts and with adjustments. The pack finishes with a manufacturing, income statement and statement of financial position to be completed.

One of the tool to analyse the effects of business transaction is by using the accounting equations. However this conduct of recording transactions in equation form is not common. Instead, businessmen establish their separate records called accounts. The components of those accounts include a record of assets, liabilities and owner's equity. This accounts help the staff and the owners to prepare, analyse, classify and report financial information.

Manufacturing costs are the costs necessary to convert raw materials into products. All manufacturing costsmust be attached to the units produced for external financial reporting under USGAAP. The resulting unit costs are used for inventory valuation on the balance sheet and for the calculation of the cost of goods sold on the income statement.

Direct costs are expenses that a company can easily connect to a specific "cost object," which may be a product, department or project. This includes items such as software, equipment, labor and raw materials. If your company develops software and needs specific pregenerated assets such as purchased frameworks or development applications, those are direct costs.

Labor and direct materials, which are used in creating a specific product, constitute the majority of direct costs. For example, to create its product, an appliance maker requires steel, electronic components and other raw materials.

While salaries tend to be a fixed cost, direct costs are frequently variable. Variable expenses increase as additional units of a product or service are created, whereas an employee's salary remains constant throughout the year. For example, smartphone hardware is a direct, variable cost because its production depends on the number of units ordered.

Indirect costs go beyond the costs associated with creating a particular product to include the price of maintaining the entire company. These overhead costs are the ones left over after direct costs have been computed, and are sometimes referred to as the "real" costs of doing business.

The materials and supplies needed for the company's day-to-day operations are examples of indirect costs. These include items such as cleaning supplies, utilities, office equipment rental, desktop computers and cell phones. While these items contribute to the company as a whole, they are not assigned to the creation of any one service.

Indirect labor costs make the production of cost objects possible, but aren't assigned to a specific product. For example, clerical assistants who help maintain the office support thecompany as a whole instead of just one product line. Thus, their labor can becounted as an indirect cost.

Much like direct costs, indirect costs can be both fixed and variable. Fixed indirect costs include things like the rent paid for the building in which a company operates. Variable costs include the ever-changing costs of electricity and gas.

The key difference between product costs and period costs is that products costs are only incurred if products are acquired or produced, and period costs are associated with the passage of time. Thus, a business that has no production or inventory purchasing activities will incur no product costs, but will still incur period costs.

Examples of product costs are direct materials, direct labor, and allocated factory overhead. Examples of period costs are general and administrative expenses, such as rent, office depreciation, office supplies, and utilities.

Product costs are sometimes broken out into the variable and fixed subcategories. This additional information is needed when calculating the break even sales level of a business. It is also useful for determining the minimum price at which a product can be sold while still generating a profit.

The cost of goods manufactured for the period is added to the finished goods inventory. To calculate the cost of goods sold, the change in finished goods inventory is added to/subtracted from the cost of goods manufactured

Inventory in this classification typically involves the full amount of raw materials needed for a product, since that is usually included in the product at the beginning of the manufacturing process. During production, the cost of direct labor and overhead is added in proportion to the amount of work done. From the perspective of valuation, a WIP item is more valuable than a raw materials item (since processing costs have been added), but is not as valuable as a finished goods item (to which the full set of processing costs have already been added).

In prolonged production operations, there may be a considerable amount of investment in work in process. Conversely, the production of some products occupies such a brief period of time that the accounting staff does not bother to track WIP at all; instead, the items in production are considered to still be in the raw materials inventory. In this latter case, inventory essentially shifts directly from the raw materials inventory to the finished goods inventory, with no separate work in process accounting at all.

Work in progress accounting involves tracking the amount of WIP in inventory at the end of an accounting period and assigning a cost to it for inventory valuation purposes, based on the percentage of completion of the WIP items.

WIP accounting can be incredibly complex for large projects that are in process over many months. In those situations, we use job costing to assign individual costs to projects. See the job costing article for more information.

It is much easier to use standard costs for work in process accounting. Actual costs are difficult to trace to individual units of production, unless job costing is being used. However, standard costs are not as precise as actual costs, especially if the standard costs turn out to be inaccurate, or there are significant production inefficiencies beyond what were anticipated in the standard costs.

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